If one was trading off Daily or Weekly Charts you would be forgiven for asking what the fuss was all about, price action seemed rather boisterous this week, but in hindsight the longer terms charts will illustrate that in a lot of pairs price did not fluctuate that drastically from market open on Monday. This week was characterised by sharp USD selling in the beginning of the week, and then a sharp USD rally on Thursday and Friday.
I would define my personal trading strategy as 90% technical and only 10% fundamental, as I live by the theory that “the fundamentals are priced in the technical.” It is weeks like these however that remind me of the value of keeping up with the fundamentals – the majority of the “big” moves this week were off the back of surprising economic data releases.
Conflicting headlines from ECB President Draghi was the catalyst for the EURUSD to trade to the lowest levels since March. News that the EU could not seal a trade agreement with Canada continued the selling momentum and the pair had a brief test of 1.0850, a late rally saved some blushes but I think that we could perhaps see another test of that level next week. What the current week has raised for me is that the EU are deluding themselves if they believe there will only be limited “damage” in the EURUSD after Brexit.
GBPUSD seemed as though it was experiencing a nasty nosebleed for most of the week, but the pair surprisingly ended the week with a moderate gain. Global Equity Fund Managers are now starting to see value in UK shares as a result of the lower GBPUSD levels, rebalancing of their portfolios by buying these shares will ultimately prop up cable. I am still of the view that Brexit will cause a lot of volatility over the next year and so I prefer to search for opportunity elsewhere.
The CAD was obliterated this week, even a small recovery in oil prices could not create some cheer after a hint of a rate cut before year end. The last thing CAD needed was weak data – and that’s exactly what they got – both retail sales and inflation had a bad miss and this led the march upwards. The USDCAD ended the session at 1.3325, the highest levels since March, it traded through some rather strong resistance levels. I got the impression that this may have been a tad over done, and I will be burning the midnight oil on Sunday night as I think that there may be a deep rally which could start in the Asian session – and I don’t want to miss that opportunity!
The AUDUSD spent most of the week trading higher against the USD, it took a rather poor employment data miss to halt the pair. It looked a volatile run and it was, but on the week the price levels closed around where it opened. A similar story in the NZDUSD where it was a better than expected data release that lit the fire for the Kiwi to test higher ground, it did give back some of its gains on Friday but I think that this pair may find some support around 0.7150. I have noticed an inverse correlation between the NZDUSD and US treasury yields forming and this is something that I will be monitoring.
Considering the political space South Africa is currently in, the USDZAR was impressively resilient trading back below the 14.0000 handle. I would expect the MTBS (Mid Term Budget Speech) to be rather conservative and there to be no surprises, I guess that only question international traders will be asking is – who is going to deliver the speech? That statement alone illustrates how quickly the political landscape can change in South Africa and the reason that I won’t trade this pair.
The large moves this week has created some opportunity and I for one cannot wait for Monday, before that I will try and enjoy the week end!!
Weekly FX Ranges 24/10/2016 – 28/10/2016
EURUSD
Resistance 1.0975 – 1.1040
Support 1.0870 – 1.0825
GBPUSD
Resistance 1.2340 – 1.2440
Support 1.2100 – 1.2026
AUDUSD
Resistance 0.7679 – 0.7720
Support 0.7586 – 0.7488
NZDUSD
Resistance 0.7250 – 0.7309
Support 0.7106 – 0.7016
USDCAD
Resistance 1.3300 – 1.3350
Support 1.3040 – 1.2927
USDJPY
Resistance 104.19 – 104.60
Support 102.80 – 102.00
USDCHF
Resistance 0.9950 – 0.9990
Support 0.9840 – 0.9742
USDZAR
Resistance 14.2400 – 14.3914
Support 13.8000 – 13.5431
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